Equitable Charges on House

[gramtrad]

Hi All,

I am looking for some information and wonder if any one can help.

I have a couple of legal charges on my house and also some equitable charges and am planning to sell the property this year.

I have just been to see solicitor to discuss the position. It seems that there will be insufficient equity to clear all of the equitable charges My thoughts, after initial research, were that equitable charges that couldn't be satisfied, due to insufficient equity, would simply fall away.

However, I am told that the charges must be removed when the property is sold in order to give a clean title to the buyer as no one would buy the property if the charges remained.

I am not concerned about being chased for the money as the debts relating to the equitable charges are now statute barred. But, I do want to sell the property, rather than just let it get re-possessed.

Does anyone have a view, please, on what happens to equitable charges in my situation?

Grateful for any informed views/ comments.

[R0b]

Re: Equitable Charges on House

The charges will be made against the asset itself not you personally. Assuming I understand your solicitor correctly, if someone were to buy the property with the remaining equitable charges (but the legal charges cleared) then the owners of those charges could in theory, apply to the court for an order of sale of the property against the new buyer to recover their money. No reasonably sane person would purchase a property and take on someone else's debts, unless of course they have money to play with and really want the house!

It is common practice that the seller agrees or undertakes to transfer title of the property free from encumbrances. In other words, clear of any legal, equitable or other interest in the property.

My property knowledge is not great these days but perhaps @Diana M might be able to expand on this.

[gramtrad]

Re: Equitable Charges on House

Thanks, Rob,

That is basically what my solicitor is saying, although she was not entirely sure (and is checking with colleagues). I am personally trying to dig a little deeper and get a proper understanding of it.

My thoughts, upon initial research, were that if there was not enough equity to clear equitable charges then they would simply fall away on sale. However, if they do not, then that would cause any sale to fail, and the house would be unsalable, with repossession perhaps being the only option. I guess that the Building Society who then repossessed the property would have the same predicament if they then tried to sell it!

[R0b]

Re: Equitable Charges on House

An equitable charge commonly occurs where there there has been an attempt to register the charge as a legal one but the formalities have not been complied with e.g. there was a failure to register it. Other instances where it might arise is if a court has made an interim or final charging order, these are also deemed to be equitable charges (or perhaps the interested party registered a legal charge but for some unknown reason removed it from the register this would then become an equitable charge if not re-registered).

It is not strictly true to suggest that the house can never be sold, because you do have the option to pay the debt and then have the charge removed, but as you've said you don't have any intention of doing this so you are a bit stuck. The only other thing I can think of is that you can make an application to the court to discharge the equitable charges (or the charging order if that's what they are) however, I don't think this will be done lightly and there would have to be some other solution offered to protect the equitable charge owners' interest. Other than paying them off to reduce the debt, I can't think of anything else that is plausible.